Tax Rates

You don't need a detailed understanding of the whole process, but grasping a few facts will help. First, it is necessary for the taxing authority to know the amount of money (the budget) the local government will spend for one year. The local government provides income for regulatory and service departments, schools, police and fire departments, road maintenance, library, etc.

The total budget is composed of these salaries and expenses along with bonded indebtedness (principal and interest payments on borrowed money that was voted for). This budget is then divided by the total dollar amount of all the assessed value of real estate in the tax district (provided by the assessor) to determine your tax rate.

That tax rate when multiplied by your property value (assessed value determined by the tax assessor) equals your tax bill. For additional details, see Chapter 6 under the section, The Mass Appraisal Process and Yearly Revaluation Districts.

More detailed information on the tax rate follows. Do not worry if you do not completely understand it, as it is not essential in ascertaining the facts for your case. The tax rate may be expressed as mills or as a percentage.

It may be shown as dollars per hundred ($7.00 per hundred, shown as .07) and may also be known as the mill rate (millage means per thousand). For example, a millage rate quoted as 70 mills would be equivalent to a tax rate of $70.00 per thousand in valuation.

Varying assessment ratios and tax rates can have the same tax effect on a property. In the following example, the mill rate is the number of mills per dollar of assessed value; the assessment is expressed as a percentage of market value.

Market Value: $80,000

Assessment Ratio: 90% (.90 x $80,000 = $72,000)

Assessment: $72,000

Tax Rate: 50 mills

Taxes: $3,600 (.050 x $72,000)

Another tax district or even a community within the same tax district may be assessed at 55% (sales ratio) but with a higher tax rate of 82 mills yet resulting in nearly equal taxes.

Market Value: $80,000

Assessment Ratio: 55% (.55 x $80,000 = $44,000)

Assessment: $44,000

Tax Rate: 82 mills

Taxes: $3,608 (.082 x $44,000)

Some states express taxes in dollars per hundred. The same $80,000 property, with a similar assessment and paying the same amount of tax might appear as:

Market Value: $80,000

Assessment Ratio: 55%

Assessment: $44,000

Tax Rate: $8.20 per hundred (for dollar amount move decimal left two places)

Taxes: $3,608 (.082 x $44,000)

For more how-to information click: real estate tax guidelines for tax appeals.

Criteria that may bring about a property tax reduction include:

1. Taxability - which refers to exempt status and is rarely the case (see page 94).

2. Mechanical Errors - refers to computational errors, incorrect property sketches and measurements of the floor plan of your residence.

3. Fair Market Value - concerns property that is appraised at a value higher than the most probable price it would bring in a sale occurring under normal market conditions.